How States Can Legalize Marijuana Despite Federal Prohibition

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American cannabis policy presents a contradiction: federal law classifies marijuana alongside heroin as among the most dangerous drugs, yet 24 states have legalized it for adult recreational use and many more allow medical use.

This creates a landscape where state-licensed businesses sell a federally illegal product, and millions of Americans engage in daily conduct that is lawful under state statute but a federal crime.

How can states enact and maintain laws that directly conflict with federal law? The answer lies in the interplay between decades-old federal drug law, foundational principles of the U.S. Constitution, shifting political winds that shape enforcement priorities, and overwhelming public demand for change.

Understanding this contradiction requires examining the architecture of federal prohibition, the constitutional balance between federal supremacy and states’ rights, the fragile policy workarounds that allow a multi-billion-dollar industry to exist, and the economic and social forces driving states to chart their own course.

Federal Marijuana Prohibition

The foundation of federal marijuana prohibition is the Controlled Substances Act (CSA), a sweeping piece of legislation that has dictated U.S. drug policy for over half a century.

The Controlled Substances Act

Enacted in 1970, the Controlled Substances Act established a unified federal framework for regulating drugs and other substances. It replaced a patchwork of earlier laws and was designed to control the manufacture, importation, possession, use, and distribution of substances deemed to have a potential for abuse.

The CSA was also intended to fulfill the United States’ obligations under international drug-control treaties, such as the 1961 Single Convention on Narcotic Drugs.

A crucial element of the CSA is its assertion of broad federal authority. Congress declared that even purely local or intrastate drug activities have a “substantial and direct effect” on interstate commerce, thereby justifying federal control over all aspects of the drug trade within the nation’s borders.

This constitutional justification, based on the Commerce Clause, is the legal bedrock upon which the federal government’s nationwide prohibition of marijuana rests.

The Five Schedules of Control

The CSA organizes controlled substances into five distinct categories, or “schedules,” based on three primary criteria: the substance’s potential for abuse, whether it has a currently accepted medical use in treatment in the United States, and its potential to cause psychological or physical dependence when abused.

The criteria for Schedule I, where marijuana has resided since 1970, are the most stringent. To be placed in Schedule I, a substance must have all three of the following characteristics:

• A high potential for abuse
• No currently accepted medical use in the United States
• A lack of accepted safety for use, even under medical supervision

This classification is the lynchpin of federal prohibition. By defining marijuana as having no medical value, the CSA legally separates it from drugs like cocaine, methamphetamine, and fentanyl, all of which are in Schedule II because the government recognizes they have some medical application despite their high potential for abuse.

Source: U.S. Drug Enforcement Administration

This scheduling has created a self-perpetuating cycle that has stifled reform for decades. To be removed from Schedule I, a substance must be proven to have an “accepted medical use.” In the modern regulatory environment, this requires extensive, large-scale clinical trials that meet the rigorous standards of the Food and Drug Administration (FDA).

However, marijuana’s status as a Schedule I substance makes it exceptionally difficult for researchers to legally obtain the drug and secure the necessary funding and federal approval to conduct such studies. For years, the DEA cited this resulting lack of FDA-approved research as a primary reason not to reschedule marijuana, effectively creating a “Catch-22” where the classification itself prevents the generation of evidence needed to change it.

The Push to Reschedule Marijuana

After decades of petitions and legal challenges failed to move the needle, a formal administrative process to reconsider marijuana’s classification is now underway, representing the most significant federal cannabis policy shift in history.

The process began on October 6, 2022, when President Joe Biden issued a statement asking the Secretary of Health and Human Services (HHS) and the Attorney General to “initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”

Following this directive, HHS conducted a scientific and medical evaluation. On August 29, 2023, it delivered a landmark recommendation to the Drug Enforcement Administration (DEA): move marijuana from Schedule I to Schedule III.

To reach this conclusion, HHS broke with decades of precedent by using a new, two-part test to determine that marijuana does have a “currently accepted medical use.” This finding directly challenged the core justification for marijuana’s Schedule I status.

On May 21, 2024, the Department of Justice, acting through the DEA, formally accepted this recommendation and published a notice of proposed rulemaking to transfer marijuana to Schedule III. This opened a public comment period and, after receiving numerous requests for hearings, the DEA announced it would hold formal administrative hearings on the proposal.

As of early 2025, these hearings are ongoing, where various parties will present factual evidence and expert opinion on whether the move is justified based on the CSA’s eight-factor analysis, which includes abuse potential, pharmacological effects, and current scientific knowledge.

It’s crucial to understand what this potential rescheduling would and would not do. While the move to Schedule III would be a monumental shift in federal policy, it’s not the same as federal legalization. For the average consumer in a state where recreational cannabis is already legal, not much would change immediately.

However, the move would have profound implications for the cannabis industry and medical research. Most significantly, it would exempt state-legal cannabis businesses from Internal Revenue Code Section 280E, a punitive tax provision that currently prevents them from taking standard business deductions available to other industries, which could dramatically improve their financial stability.

It would also ease restrictions on scientific research and open a pathway for the FDA to approve and regulate cannabis-based medicines that could be prescribed by doctors and dispensed by pharmacies nationwide.

Fundamentally, rescheduling would represent a formal admission by the U.S. government that marijuana has medical value, undermining the 50-year-old rationale for its harsh prohibition and lending powerful momentum to broader reform efforts.

Constitutional Balance: Federal Power vs. States’ Rights

The ability of states to legalize marijuana in defiance of the CSA hinges on a foundational tension in the U.S. Constitution: the power of the federal government versus the sovereignty of the states. This conflict is primarily arbitrated through two key constitutional provisions and a critical legal doctrine that has emerged from them.

The Supremacy Clause: Federal Authority

The argument for federal power is rooted in Article VI, Clause 2 of the U.S. Constitution, known as the Supremacy Clause. It declares that the Constitution and federal laws made “in Pursuance thereof” are the “supreme Law of the Land,” binding on judges in every state.

This gives rise to the legal doctrine of preemption, which holds that when a valid federal law conflicts with a state law, the federal law prevails and the state law is rendered void.

From this perspective, the legal situation is straightforward. The federal Controlled Substances Act explicitly prohibits the possession and distribution of marijuana. State laws that legalize and regulate these same activities are in direct, irreconcilable conflict with the CSA. Therefore, under a simple reading of the Supremacy Clause, these state laws are preempted and unconstitutional.

This is the legal foundation that gives federal agencies like the DEA the authority to enforce federal marijuana laws anywhere in the country, regardless of state law.

The Tenth Amendment: State Sovereignty

The counterweight to federal supremacy is the Tenth Amendment to the Constitution. It states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

This amendment is the cornerstone of American federalism, the principle of “dual sovereignty” in which power is shared between the federal government and the state governments. While the federal government has enumerated powers (like regulating interstate commerce), states retain broad, inherent “police powers” to protect the health, safety, and general welfare of their citizens.

The Anti-Commandeering Doctrine

The tension between the Supremacy Clause and the Tenth Amendment is resolved by a critical legal principle known as the anti-commandeering doctrine. This doctrine, derived from the Tenth Amendment, establishes that while the federal government can pass its own laws, it cannot force the states to carry out its will.

Specifically, Congress cannot “commandeer” a state’s resources by compelling its legislature to enact a federal program or by forcing its executive officials—like state and local police—to enforce federal law.

This principle was firmly established in a series of Supreme Court cases, including New York v. United States (1992) and Printz v. United States (1997). It was powerfully reaffirmed in the 2018 case Murphy v. NCAA, where the Court struck down a federal law that prohibited states from authorizing sports gambling. The Court reasoned that the law unconstitutionally commandeered the states’ legislative power, calling it a “direct affront to state sovereignty.”

The practical effect of this doctrine on marijuana policy is profound. A state cannot nullify the federal CSA, but it can repeal its own state-level laws that criminalize marijuana. It can then choose to replace prohibition with a new system of regulation.

While possessing marijuana remains a federal crime, the state’s police officers and prosecutors are under no constitutional obligation to enforce that federal crime. Given that historically over 99% of all marijuana arrests in the U.S. have been made by state and local law enforcement, not federal agents, a state’s decision to opt out of enforcement effectively removes the primary mechanism of prohibition within its borders.

This creates a system of parallel legal universes. The Supremacy Clause provides the federal government with a “sword”—the authority to use its own agents, like the DEA, to investigate and prosecute violations of the CSA anywhere in the country. The Tenth Amendment’s anti-commandeering doctrine, however, gives states a “shield.”

It allows a state to declare that it will not expend its own police, judicial, or legislative resources to help the federal government enforce its marijuana ban. This legal arrangement is a deliberate feature of American federalism.

The federal government has never challenged a state’s legalization law on preemption grounds, likely because it anticipates that the courts would uphold the state’s power under the anti-commandeering doctrine. In fact, when a private party sued to have Arizona’s medical marijuana law struck down as preempted, the Department of Justice argued in favor of dismissing the lawsuit.

The current landscape is the direct result of states exercising their reserved powers to act as “laboratories of democracy,” a core feature of the federalist system.

Federal Policy in a Shifting Landscape

Because the Constitution allows for two conflicting sets of laws to exist simultaneously, the federal government has relied on policy tools, rather than legal force, to manage the growing divide with states. These tools, however, are often informal and politically fragile, creating a foundation of profound instability for the state-legal cannabis industry.

The Cole Memorandum: Prosecutorial Discretion

As the first states—Colorado and Washington—legalized recreational marijuana in 2012, the Obama administration faced a choice: launch a full-scale federal crackdown or find a way to accommodate the will of the voters. It chose the latter.

On August 29, 2013, Deputy Attorney General James M. Cole issued a guidance document to all U.S. Attorneys, now famously known as the Cole Memorandum.

The memo did not change the law but instead directed federal prosecutors to use their discretion. It stated that in jurisdictions with “strong and effective regulatory and enforcement systems,” the Justice Department would deprioritize prosecuting marijuana-related conduct that was legal under state law, so long as it did not threaten eight key federal priorities.

These priorities included:

• Preventing the distribution of marijuana to minors
• Preventing revenue from going to criminal enterprises, gangs, and cartels
• Preventing the diversion of marijuana to states where it remains illegal
• Preventing state-authorized activity from being used as a cover for other illegal activity
• Preventing violence and the use of firearms in cultivation and distribution
• Preventing drugged driving and other adverse public health consequences

The Cole Memo provided a crucial “permission structure” that allowed the state-legal cannabis industry to grow. It signaled to states that if they built robust regulatory systems—including “seed-to-sale” tracking to prevent diversion—the federal government would largely take a hands-off approach.

This era of détente came to an abrupt halt on January 4, 2018, when then-Attorney General Jeff Sessions, a staunch opponent of marijuana legalization, rescinded the Cole Memo. Sessions argued the guidance “undermined the rule of law” and directed federal prosecutors to enforce the CSA according to established principles.

While the move sent a shockwave of fear through the industry, it did not result in the widespread crackdown many feared, largely because federal enforcement resources remained limited and focused on the same major trafficking organizations as before.

The Biden administration has since returned to the spirit of the memo, with Attorney General Merrick Garland testifying that it is a waste of Justice Department resources to prosecute individuals who are complying with state laws.

Congressional Budget Restrictions

While the Cole Memo was a policy of the executive branch, Congress has used its own power to create a separate, more durable protection. Since 2014, Congress has annually included a budget rider in appropriations bills that restricts the Department of Justice (DOJ).

Known originally as the Rohrabacher-Farr amendment and now as the Rohrabacher-Blumenauer amendment, this provision prohibits the DOJ from spending any of the funds allocated by Congress to “prevent… States… from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”

Initially, the DOJ interpreted this language very narrowly, arguing that it only protected state governments and their employees, not private citizens or businesses operating under those state laws. However, federal courts soundly rejected this position.

In a key 2016 decision, the U.S. Court of Appeals for the Ninth Circuit ruled in United States v. McIntosh that the amendment protects state-compliant medical marijuana patients and providers from federal prosecution. Judge Charles Breyer, in an earlier district court ruling on the matter, called the DOJ’s interpretation one that “defies language and logic” and “tortures the plain meaning of the statute.”

The critical limitation of this amendment is its scope: its protection extends only to medical marijuana programs. It provides no legal shield for the recreational cannabis markets that now operate in 24 states.

Together, these workarounds reveal that federal cannabis policy is governed by “soft law,” not “hard law.” The primary mechanisms allowing the industry to function are a rescinded internal memo and a temporary budget provision that must be re-negotiated every year.

This creates a precarious legal foundation and helps explain why the industry faces enormous practical hurdles, such as a lack of access to banking services and federal bankruptcy protection, as financial institutions remain wary of servicing an industry whose protections are so politically fragile.

Legislative Solutions: The STATES Act

Given the instability of the current policy landscape, there is a growing bipartisan movement in Congress to pass legislation that would permanently resolve the conflict between federal and state marijuana laws. The leading proposal is a bill that leans heavily on the principles of federalism and states’ rights.

A Federalism-Based Solution

First introduced in 2018 by a bipartisan coalition including Senators Elizabeth Warren (D-MA) and Cory Gardner (R-CO), the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act seeks to formally align federal law with the reality on the ground in legal states.

The bill’s core principle is not to legalize marijuana at the national level, but rather to amend the Controlled Substances Act to make it inapplicable to any person or business acting in full compliance with state, tribal, or territorial cannabis laws. For states that wish to maintain prohibition, the STATES Act would change nothing.

Key Provisions of the STATES 2.0 Act

The most recent version of the bill, often called the STATES 2.0 Act, proposes a comprehensive framework for reform. Its key provisions include:

Exemption from the CSA: It would effectively remove marijuana from the CSA for all activities that are compliant with state or tribal law, ending the threat of federal prosecution for state-licensed operators and consumers.

Federal Guardrails: The bill would maintain federal authority to prohibit certain high-risk activities, such as selling marijuana to anyone under the age of 21 (for non-medical purposes) and distributing it at transportation safety facilities like highway rest stops.

Regulatory Paradigm Shift: It would move primary regulatory oversight away from the DEA and toward agencies that regulate other consumer products. The Alcohol and Tobacco Tax and Trade Bureau (TTB) would be tasked with regulating interstate commerce, while the Food and Drug Administration (FDA) would oversee product safety, labeling, and manufacturing standards, much as it does for alcohol and tobacco.

Resolving Financial Hurdles: The act would explicitly clarify that financial transactions involving state-compliant cannabis businesses are not considered unlawful trafficking. This provision is designed to finally open access to the banking system, allowing businesses to secure loans, accept credit cards, and operate without relying on cash. It would also formally permit interstate commerce of cannabis between legal states.

The political genius of the STATES Act is that it frames the issue not as being “pro-pot,” but as being “pro-federalism.” For Democrats, it accomplishes the goal of ending federal prohibition and allowing regulated markets to thrive. For Republicans, it is presented as a defense of the Tenth Amendment, empowering each state to decide for itself without a federal mandate.

This dual appeal is why it has consistently garnered bipartisan support and is widely seen as the most viable legislative path to resolving the nation’s cannabis paradox.

Economic and Social Impacts

The state-led movement to legalize marijuana is being propelled by powerful economic incentives and a growing demand for social and racial justice. The real-world results from these “laboratories of democracy” have, in turn, fueled further reform efforts across the country.

Tax Revenue and Economic Growth

The most tangible benefit of legalization for states has been a massive influx of new tax revenue. Combined, states with legal markets have collected over $23 billion in cannabis tax revenue since sales began. This new funding stream has been used to support everything from school construction and public health programs to local government services and social equity initiatives.

Colorado: Since legal sales began in 2014, Colorado has generated over $2.4 billion in tax revenue from more than $11.7 billion in cannabis sales. The economic impact has been broad, with studies showing strong GDP growth, job creation, and a boom in tourism following legalization.

California: As the world’s largest cannabis market, California has generated over $6.7 billion in total tax revenue since 2018. The state’s cannabis industry supports tens of thousands of jobs and is estimated to have a total economic impact of up to $18 billion when accounting for spin-off industries like legal services, construction, and tourism.

States have adopted a variety of tax structures to capture this revenue, reflecting different policy priorities.

Source: National Conference of State Legislatures, The Motley Fool

Social Justice and Racial Equity

Beyond the economic benefits, a powerful moral argument is driving legalization: the need to end a war on drugs that has been waged with profound racial bias. Research from the American Civil Liberties Union (ACLU) has consistently shown that despite roughly equal rates of use among racial groups, Black people are significantly more likely to be arrested for marijuana possession than white people—a national average of 3.6 times more likely.

A marijuana conviction can create a lifetime of collateral consequences, erecting barriers to employment, housing, education, and public benefits, disproportionately harming communities of color.

In response, modern legalization laws are increasingly being designed as tools for reparative justice. These laws often include social equity provisions aimed at repairing the damage of prohibition. Key components include:

Automatic Expungement: Clearing past low-level marijuana convictions from criminal records, often funded by tax revenue from new sales.

Community Reinvestment: Dedicating a significant portion of tax revenue to grants and services in the communities most harmed by disproportionate enforcement. Illinois, for example, allocates 25% of its cannabis revenue to its Restore, Reinvest, and Renew (R3) program.

Equity in Licensing: Creating programs that provide technical assistance, reduced fees, and priority licensing to individuals from communities impacted by the war on drugs, in an effort to foster a diverse and equitable industry.

This approach creates a symbiotic relationship between the economic and social justice arguments for legalization. The “green rush” generates the tax revenue necessary to fund the expungement services, community grants, and business incubators that form the backbone of reparative justice efforts.

In this way, states are using the profits of a new industry to address the injustices of the old one.

Public Opinion and Political Momentum

Underpinning the entire state-led movement for cannabis reform is a clear and overwhelming mandate from the American public. Over the past half-century, public opinion has shifted dramatically from widespread opposition to a broad national consensus in favor of legalization.

National Consensus for Legalization

According to a 2023 Gallup poll, a record-high 70% of U.S. adults believe the use of marijuana should be legal. This marks a stunning reversal from 1969, when Gallup first asked the question and found only 12% in favor.

Support crossed the 50% threshold in 2013, the year after Colorado and Washington pioneered recreational legalization, and has climbed steadily since. Research from the Pew Research Center confirms this trend, finding in 2025 that 88% of Americans support legalizing marijuana for at least medical use, with 54% favoring legalization for both medical and recreational use.

Bipartisan and Cross-Generational Support

This support is no longer a fringe or partisan issue. While strongest among Democrats (87%) and liberals (91%), a clear majority of Republicans (55%) and conservatives (52%) now also favor legalization. The consensus also spans all age groups, with support from 79% of adults aged 18-34 and, remarkably, 64% of those aged 55 and older.

This groundswell of public support has fundamentally altered the political landscape. For decades, supporting marijuana legalization was considered politically toxic, risking a “soft on crime” label. Today, with supermajorities of voters in every demographic and political party in favor, the political risk has flipped.

The pressure is now on elected officials to align federal policy with the undeniable will of the people.

This dynamic illustrates a powerful feedback loop. The initial rise in public support created the political space for the first states to legalize. The subsequent success of those state-level experiments—which generated significant tax revenue without the catastrophic social consequences opponents had predicted—reassured the public and accelerated national support.

This, in turn, has encouraged more states to legalize, creating a cycle that places ever-increasing pressure on the federal government’s outdated and unpopular policy of prohibition.

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